Is economics a science? (Trivers)

Is economics a science? (Trivers)

Is economics a science? The short answer is no. Economics acts like a science and quacks like one—it has developed an impressive mathematical apparatus and awards itself a Nobel Prize each year—but it is not yet a science. It fails to ground itself in underlying knowledge (in this case, biology). This is curious on its face, because models of economic activity must inevitably be based on some notion of what an individual organism is up to. What are we trying to maximize? Here economists play a shell game. People are expected to attempt to maximize their “utility.” And what is utility? Well, anything people wish to maximize. In some situations, you will try to maximize money acquired, in others food, and in yet others sex over food and money. So we need “preference functions” to tell us when one kind of utility takes precedence over another. These must be empirically determined, since economics by itself can provide no theory for how the organism is expected to rank these variables. But determining all of the preference functions by measurement in all the relevant situations is hopeless from the outset, even for a single organism, much less a group.

As it turns out, biology now has a well-developed theory of exactly what utility is (even if it misrepresented the truth for some one hundred years) based on Darwin’s concept of reproductive success. If you are talking about utility (that is, benefit) to a living creature, then it is useful to know that this ultimately refers to the individual’s inclusive fitness, that is, the number of its surviving offspring plus effects (positive and negative) on the reproductive success of relatives, each devalued by its relatedness to them. In many situations, the added precision of this definition (compared to reproductive success alone) makes no difference, but by resolutely acting as if they can produce a science out of whole cloth, that is, independent of noneconomic scientific knowledge, economists miss out on a whole series of linkages that may be critical. They often implicitly assume, as we noted in the first chapter, that market forces will naturally constrain the cost of deception in social and economic systems, but such a belief fails to correspond with what we know from daily life, much less biology more generally. Yet such is the detachment of this “science” from reality that these contradictions arouse notice only when the entire world is hurtling into an economic depression based on corporate greed wedded to false economic theory.

The mistake is partly related to the fact that “utility” has ambiguity built into it. It can refer to utility of your actions to you or to others, including the rest of your group. Economists easily imagine that the two kinds of utility are well aligned. They often argue that individuals acting for personal utility (undefined) will tend to benefit the group (provide general utility). Thus they tend to be blind to the possibility that unrestrained pursuit of personal utility can have disastrous effects on group benefit. This is a well-known fallacy in biology, with hundreds of examples. Nowhere do we assume in advance that the two kinds of utility are positively aligned. This must be shown separately for any given case.

One recent effort by economics to link up with allied disciplines is called behavioral economics, a link with psychology that is most welcome. But as usual, economists resolutely refuse to make the final link to evolutionary theory, even when going through the motions. That is, even those economists who propose evolutionary explanations of economic behavior often do so with unusual, counterlogical assumptions. For example, a common recent mistake is to assume that our behavior evolved specifically to fit artificial economic games.
Biologists have brought living creatures into the laboratory for centuries to study their traits, but no one I know of has shortcut the study of the function of the trait by imagining that the trait evolved to fit the laboratory.

A recent Nobel winner in economics wondered how it was possible for his well-developed science to fail completely to predict the catastrophic economic events that started in 2008. One part, of course, is that economic events are intrinsically complex, involving many factors, and the final result, the aggregate of the behavior of an enormous number of people, though not quite as complex as the weather, is almost as difficult to predict. As for the cause the economist located, it was infatuation with beautiful mathematics at the cost of attention to reality. Surely this is part of the problem, but nowhere does he suggest that the first piece of reality they should pay attention to—and this has been obvious for some thirty years now—is biology, in particular evolutionary theory. If only thirty years ago economists had built a theory of economic utility on a theory of biological self-interest—forget the beautiful math and pay attention to the relevant math—we might have been spared some of the extravagances of economic thought regarding, for example, built-in anti-deception mechanisms kicking in to protect us from the harmful effects of unrestrained economic egotism by those already at the top.





The folly of fools : the logic of deceit and self-deception in human life
Robert Trivers



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